Business Plans are written with the intention of getting presented to venture capitalists in hopes of securing funds for the business venture. Of course there are other reasons in which to write a business plan, but securing capital is the primary one. Venture capitalists can at times look through hundreds of plans – so it’s important to incorporate the specific things they do look for when you’re writing a plan.
I’m currently writing a business plan for an independent music publishing company and after researching information presented by venture capitalists Daymond John and XXXX, there are a few things I’ve incorporated and changed about my business plan along the way.
Daymond John stresses the importance of laying out a complete plan. This means doing your homework about similar businesses in the market and researching every aspect of your business. In designing my business plan I have carefully researched what others in the industry are doing, as well as what they are not doing. A good analysis of the market is an important part of a business plan because it allows venture capitalists to see where your company would fit in.
John also stresses the importance of being able to explain how your business operates to an individual who is not in the industry you are venturing into. This piece of advice has caused me to write a detailed operations section in my business plan. While the company operations might seem trivial to me, or even to others who understand how music licensing works, to a venture capitalist unfamiliar with the music industry these concepts are foreign. Giving them insight into company operations is essential.
Kevin Harrington stresses the importance of having a big marketing budget. He insists that 20 to 30 percent of a businesses’ initial budget should be towards marketing. This has caused me to change my marketing scheme. While originally thought to be a small marketing campaign, I have reworked my marketing and advertising budget so that there are different marketing channels being targeted every month, from different angles.
Harrington also says that a great executive summary is important – you need to show how you are going to benefit the investor and how the investor is going to make money. You need to show how you can benefit the investor. While I have yet to begin writing my executive summary, I know that I am going to have to work extra hard on it because sometimes it is the only thing that an investor will actually look at.
Overall, it’s important to understand that an investor is going to be investing in you and that your business plan is a reflection of you.
Sources:
Daymond John's Top 30 Tips and Advice From 2010
Ten Questions FUBU CEO, Daymond John, Asks Entreprenuers
Advice from the 'Shark Tank': How to Swim with the Big Fish
ABC Shark Tank Kevin Harrington Shares His Wisdom
10.23.2011
10.02.2011
The Real Life Shark Tank
If you’ve ever thought about being an entrepreneur I’m sure you’ve watched the ABC hit-show ‘Shark Tank’. If you haven’t – you’re missing out. Shark Tank is a reality television show in which entrepreneurs present their business to a panel of investors who then evaluate and negotiate investment proposals. The panel is made up of entrepreneurs who are now investors. Two of these panelists, or ‘sharks’ as they are referred to on the show, are Daymond John and Kevin Harrington.
Daymond John was the force behind urban clothing FUBU in the 90’s. He was the founder, president and CEO of the company – leading it to $350 million in revenues by the late 1990’s. The company propelled to the levels of Donna Karan and Tommy Hilfiger. John also authored the book, Display of Power: How FUBU Changed a World of Fashion, Branding & Lifestyle. The book was named one of the best business books of 2007 by the Library Journal.
Kevin Harrington is one of the driving forces behind infomercials. He produced one of the first infomercials in 1984 and has since been involved in over 500 product launches. Harrington is a serial entrepreneur, having started several companies in the 90’s. His latest venture was a book, Act Now: How I Turn Ideas into Million-Dollar Products.
Both entrepreneurs have posted successful careers and both have critical and key components that they look for when deciding weather to invest in a particular business plan.
Kevin Harrington listed five key components he looks for before investing in a company, which he says he looks for by answering five key questions.
Is it a mass market? The bigger the market, the bigger the appeal of the product. If the market is too niche, then it leaves a smaller window of possible clients.
Is it unique in market? If there’s something similar in the market place already investors are likely to gravitate away from the investment, especially if the competition is already established. Being able to show an investor a new product, or a new feature to an old product is important.
Is it a problem solver? Everyone has a problem in the marketplace, and often times there needs go unanswered. A company that is solving this problem – weather by offering a new service or a new product, or an alternative to solving it versus one that is already available makes investors interested because they can see that there is already a market out there for your product or service.
Is there a transformation with this product? Investors look for exciting investments, products that can offer exciting changes to consumers tends to excite investors as well.
Is it multifunctional? If your company can provide different services, or if a product can provide different functions then investors feel more secure about investing because it can be marketed in many different capabilities, and thus be better than a similar product that can only offer one function. Case in point – today’s smartphone is a better investment than the traditional wireless phone.
Daymond John also tends to ask himself several questions when he looks at the key components of a business plan. While some are similar to Harrington, he also lists some addition ones.
What are the distribution channels? It’s great to have an idea and a great product, but it’s equally important to know how to get the product to the consumer. Sometimes the product can be a great, but if it is distributed poorly, can never find it’s way to consumer’s hands.
How much does the entrepreneur know about his own industry? John states that this is his biggest pet peeve when looking over business plans. An entrepreneur should know an immense amount about the industry they plan to enter into in order to competitively compete. Lack of knowledge about the industry, can bring down the company before it successfully begins.
Both entrepreneurs however agree that it is important to be able to answer all questions regarding your business and your business plan quickly. If there’s hesitation involved in answering, it causes an investor to hesitate when deciding if investing in your company is a wise decision. Take it from two guys who have been pitched countless ideas - the last thing you want as an entrepreneur is a hesitant investor.
References:
Daymond John - Shark Bio
Kevin Harrington - Shark Bio
5 Things Kevin 'Shark Tank' Harrington Looks For Before Investing
The Making of FUBU - An Interview with Daymond John
Daymond John was the force behind urban clothing FUBU in the 90’s. He was the founder, president and CEO of the company – leading it to $350 million in revenues by the late 1990’s. The company propelled to the levels of Donna Karan and Tommy Hilfiger. John also authored the book, Display of Power: How FUBU Changed a World of Fashion, Branding & Lifestyle. The book was named one of the best business books of 2007 by the Library Journal.
Kevin Harrington is one of the driving forces behind infomercials. He produced one of the first infomercials in 1984 and has since been involved in over 500 product launches. Harrington is a serial entrepreneur, having started several companies in the 90’s. His latest venture was a book, Act Now: How I Turn Ideas into Million-Dollar Products.
Both entrepreneurs have posted successful careers and both have critical and key components that they look for when deciding weather to invest in a particular business plan.
Kevin Harrington listed five key components he looks for before investing in a company, which he says he looks for by answering five key questions.
Is it a mass market? The bigger the market, the bigger the appeal of the product. If the market is too niche, then it leaves a smaller window of possible clients.
Is it unique in market? If there’s something similar in the market place already investors are likely to gravitate away from the investment, especially if the competition is already established. Being able to show an investor a new product, or a new feature to an old product is important.
Is it a problem solver? Everyone has a problem in the marketplace, and often times there needs go unanswered. A company that is solving this problem – weather by offering a new service or a new product, or an alternative to solving it versus one that is already available makes investors interested because they can see that there is already a market out there for your product or service.
Is there a transformation with this product? Investors look for exciting investments, products that can offer exciting changes to consumers tends to excite investors as well.
Is it multifunctional? If your company can provide different services, or if a product can provide different functions then investors feel more secure about investing because it can be marketed in many different capabilities, and thus be better than a similar product that can only offer one function. Case in point – today’s smartphone is a better investment than the traditional wireless phone.
Daymond John also tends to ask himself several questions when he looks at the key components of a business plan. While some are similar to Harrington, he also lists some addition ones.
What are the distribution channels? It’s great to have an idea and a great product, but it’s equally important to know how to get the product to the consumer. Sometimes the product can be a great, but if it is distributed poorly, can never find it’s way to consumer’s hands.
How much does the entrepreneur know about his own industry? John states that this is his biggest pet peeve when looking over business plans. An entrepreneur should know an immense amount about the industry they plan to enter into in order to competitively compete. Lack of knowledge about the industry, can bring down the company before it successfully begins.
Both entrepreneurs however agree that it is important to be able to answer all questions regarding your business and your business plan quickly. If there’s hesitation involved in answering, it causes an investor to hesitate when deciding if investing in your company is a wise decision. Take it from two guys who have been pitched countless ideas - the last thing you want as an entrepreneur is a hesitant investor.
References:
Daymond John - Shark Bio
Kevin Harrington - Shark Bio
5 Things Kevin 'Shark Tank' Harrington Looks For Before Investing
The Making of FUBU - An Interview with Daymond John
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